SD startup joins crowd-lending rush

Russell McLoughlin, left, and Ethan Senturia, right, co-founders of Dealstruck, a crowd funding marketplace that connects established, growing, small and medium size businesses with individual and institutional investors who want to lend money to those businesses, work on a workflow diagram.
— Howard Lipin

Russell McLoughlin, left, and Ethan Senturia, right, co-founders of Dealstruck, a crowd funding marketplace that connects established, growing, small and medium size businesses with individual and institutional investors who want to lend money to those businesses, work on a workflow diagram.
— Howard Lipin

You may have heard of Kickstarter, the website that crowdsources capital for startup companies.

A new La Jolla company — Dealstruck — wants to take that concept a step further and use the power of the crowd to make business loans.

Dealstruck runs an online site that matches small businesses with lenders. The company does not lend; it simply helps investors and borrowers find each other. Multiple investors can pitch in, and instead of making equity investments, they provide the money for loans.

Co-founder Ethan Senturia, 27, considers his company an “alternative to the alternatives” in a market burgeoning with companies trying to fill a gap in the market. That gap has been created by tighter federal standards on banks as a result of the recent financial crisis.

Unlike Google Ventures, which makes loans to startups, Dealstruck will lend only to established small businesses. Its closest competitors, Kabbage and On Deck Capital, lend their own money, much like a bank.

“At a high level, Dealstruck is a marketplace for growing, established small and medium businesses to access affordable loans from individual and institutional investors,” said Senturia, who graduated from Wharton School of the University of Pennsylvania and worked as an analyst at both Lehman Brothers and Barclays Capital.

It is also an opportunity for investors unhappy with their fixed-income returns on short-term loans to get a better return on their investment, he said. Dealstruck estimates investment returns will run from 5 percent to 15 percent, but warns of the risks inherent in lending to businesses.

“If you cannot afford to lose the entire amount of your investment you should not invest,” the company’s website advises.

Dealstruck is open to only accredited investors — those who meet the qualifications of individual accredited investors under SEC guidelines. It also says it has a more detailed and rigorous credit screning than other alternative lenders, which allows it to offer interest rates of 5 to 15 percent, compared with its competitors’ rates of 15 to 30 percent.

Dealstruck launched with 50 investors who informally committed to lending a combined $1.5 million through the platform. Already the company has received applications from 100 businesses, and investors have funded their first two requests. A $250,000 request got full funding from 21 participants within five days, and 11 investors fulfilled a request for $100,000 within 48 hours.

Since it isn’t earning loan interest, the angel investor-funded Dealstruck earns its money from fees. Businesses that get approved pay an origination fee when their loan is funded, and investors pay a servicing fee on the repayments that are made.

How Dealstruck Works

Borrower

• Apply online. Borrowers with liens, judgments, bankruptcies, and poor financials will not be approved.